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BRUSSELS (Reuters) - Britain has proposed a way to lower the European Union's 2020 target for renewable energy by counting the contribution from biofuels twice, avoiding the need for billions of euros in investment, a document shows.

Policy on transport fuel made from crops and other plant matter has stirred heated debate because of concern some biofuels add to greenhouse emissions and drive up food prices.

Energy ministers later this week will debate policy reform.

Diplomats said the British biofuel idea was attracting support from several member states, although they did not specify which. Dominant EU power Germany opposes it, they said.

In a document seen by Reuters, Britain sets out the financial benefits of an accounting method that would include biofuels towards an overall renewable energy target as well as a sub-target for reducing the emissions of transport fuel.

It would reduce to 19.6 percent an EU-wide target to get 20 percent of energy from green sources, equating to up to 60.9 terawatt hours (TWh) and savings of 5.4 billion euros (£4.51 billion) per year by 2020 on investment that would have been spent on renewables, the British analysis shows.

The cost of green energy has become a major political debate in Britain and other EU states keen to curb fuel prices.

Britain, which is looking to nuclear energy for carbon-free power, is one of the nations that falls short of its share of the EU renewable goal. Member states that fail to meet their targets could eventually face stiff financial penalties.

A spokesman for Britain's Department of Transport said its biofuel approach would avoid "displacing costs on to consumers" and could help to fund next-generation biofuels, such as those from algae or waste that do not compete with food production.

Environmental campaign groups said the move would undermine confidence in EU green policy.

"Sustainability concerns about biofuels can't be misused by one member state to water down the EU's common 20 percent target," Isabel Cancela de Abreu, a policy adviser for the European Renewable Energy Council, said.

BELOW TARGET

The latest available official EU data showed Britain had achieved a 3.8 percent green energy share in 2011, compared with its national goal of 15 percent by 2020.

The bloc, meanwhile, has begun the debate on 2030 climate and energy targets. As part of that, Britain has pushed for a relatively ambitious target for reducing carbon emissions but does not want a new goal for renewable energy.

In 2008, an EU target was introduced to get 10 percent of transport fuel from renewable sources by 2020 as part of the 20 percent EU green energy goal.

Most would have come, however, from first generation biofuels made from sugar, cereals and oilseeds, which research has shown can displace food production, inflate food prices, force forest clearance and the draining of peat land.

The Commission proposed last year capping first-generation biofuels at 5 percent of total transport fuel demand, causing outrage in the EU biofuel sector, which is worth an estimated 13 billion euros per year.

The industry says it has invested on the basis of the Commission's original proposal and that a sudden change would lead to plant closures and job losses.

In the European Parliament, lawmakers called for a 6 percent limit.

Lithuania, holder of the EU presidency, has drawn up a compromise proposal of 7 percent and said in a statement it expected the backing of EU energy ministers on Thursday.

Even if they do, the proposal would require endorsement from the European Parliament, and a final deal is not expected until 2015 because of parliamentary elections in May, followed by a change of Commissioners, whose term expires next October. ($1 = 0.7308 euros)